A central role for SP-B in the development of a functional surfactant system in type 2 cells is supported by published descriptions of inherited SP-B deficiency, work from the previous funding period regarding ontogeny of SP-B processing, and our preliminary data using SP-B antisense. SP-B expression and processing are integral components of type 2 cell phenotype and are intimately related to type 2 cell differentiation. SP-B deficiency is a component of the developmental lung disease (RDS), of fatal respiratory failure from genetic deficiency (inherited SP-B deficiency), and of diseases of surfactant dysfunction in adults and children (ARDS). Although the final common pathway often includes a reduction of mature SP-B in alveolar surfactant resulting in abnormal surface tension, the mechanisms are diverse. We have shown that SP-B expression is developmentally regulated and hormonally responsive at the post-translational level. It is therefore logical that SP-B processing enzymes would have a role in human lung diseases. Characterization of SP-B processing enzymes will open new avenues into preparing recombinant mature SP-B for exogenous surfactant, thus providing a more physiologic formulation. Also, as therapeutic uses of protease inhibitors expand, improved understanding of the SP-B processing proteases will be necessary to evaluate new generation protease inhibitors. We therefore hypothesize that proSP-B processing requires type 2 cell specific proteases which are developmentally and hormonally regulated similarly to SP-B to facilitate the coordinated expression of substrate and enzyme. Furthermore, spatial regulation of enzyme and substrate in specific subcellular organelles results in stepwise proteolysis of proSP-B which is required for exposing trafficking signals and finally in liberating mature SP-B in the multivesicular body. The proposed studies will: 1. Determine the identity of the N-Flanking domain of proSP-B and its role in SP-B trafficking; 2. Characterize the developmental and hormonal regulation of Cathepsin H, Napsin A and Gastricsin in developing fetal lung: and 3. Establish the roles of Cathepsin H, Napsin A and Gastricsin in proSP-B processing